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Background

The National Office is pleased to provide you with this Legislative Alert, which contains an overview of recent guidance issued by the U.S. Environmental Protection Agency (EPA) on implementation of Buy American provisions in the American Recovery and Reinvestment Act (ARRA), also known as the stimulus bill. A copy of the guidance is available by clicking here. This guidance applies to all ARRA funds distributed via the clean water state revolving fund (CWSRF) and is EPA’s most definitive statement thus far on how Buy American provision will impact clean water projects using ARRA funds, including how utilities can apply for waivers from Buy American requirements. This document follows previous guidance released April 3 from the Office of Management and Budget (OMB) addressing the Buy American requirements, which was analyzed by NACWA in Legislative Alert 09-10. NACWA has met with EPA on several occasion to discuss the development of this guidance and to offer comments on it and will continue to provide insight through the implementation phase of the ARRA.

This Alert highlights the major elements of the EPA guidance. However, NACWA members planning to use ARRA funds are advised to share the EPA guidance document with their legal counsel and contractors for further analysis prior to bidding any ARRA project to ensure that all Buy American requirements are fully understood and complied with.

Key Elements of EPA Buy American Guidance

General Buy American Requirements
The Buy American provision of the ARRA requires that any project funded with ARRA money must use iron, steel, and manufactured goods produced in the United States. The only exceptions apply where:

1. Iron , steel, or relevant manufactured goods are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality;
2. Inclusion of iron, steel, or manufactured goods produced in the United States will increase the cost of the overall project by 25 percent; or
3. Applying the domestic preference would be inconsistent with the public interest.
   If an ARRA recipient believes their project may quality for one of these exemptions they may apply for a waiver from the Buy American requirements. The waiver application is described in more detail below.

Definitions
The EPA guidance provides definitions for a number of critical terms in the Buy American provision. Among the most important are the following:

Steel: Defined as an alloy that includes at least 50 percent iron, between .02 and 2 percent carbon, and may include other elements. Production in the United States of the iron or steel used in the project requires that all manufacturing processes must take place in the United States, except metallurgical processes involving refinement of steel additives. These requirements do not apply to iron or steel used as components or subcomponents of manufactured goods used in the project.

Manufactured Good: Defined as a good transported to the construction site for incorporation into the building or work that has been—

1. Processed into a specific form and shape; or
2. Combined with other raw materials to create a material that has different properties than the properties of the individual raw materials.

There is no requirement with regard to the origin of components or subcomponents in manufactured goods, as long as the manufacture or assembly of the final goods occurs in the United States. In other words, the language can be interpreted to mean that a manufactured good, such as a pump or piece of electronics containing foreign-made parts or components, may be used in a clean water ARRA project, as long as the pump or electronic equipment receives its final manufacture or assembly anywhere in United States.   In order to qualify as being manufactured or assembled in the United States for purposes of Buy American requirements, the good must undergo a substantial transformation in the United States from its component pieces.  Utilities should consult their legal counsel and contractors to determine what qualifies as a substantial transformation with regard to a specific good or project.

Waiver Application Process
The application process for a Buy American waiver actually begins with the project design and bidding process. In order to qualify for a waiver, the ARRA assistance recipient (i.e. clean water utility) must make a good faith effort to design and bid the construction project for use of American made iron, steel, and manufactured goods. It is critical that the assistance recipient include ARRA’s Buy American provision in any requests for proposals or solicitations for bids, as well as in all contracts. Sample contract language to meet ARRA requirements is included in EPA’s guidance at Appendix 3. Additionally, sample certification language that an assistance recipient could require from a contractor or bidder to ensure compliance with Buy American requirements is included in EPA’s guidance at Appendix 5.

If at any point before, during, or after the bid process the assistance recipient determines that one of the three Buy American exceptions listed above could apply to its project, the recipient may apply for a waiver from the Buy American requirements. While it is also possible to apply for a waiver after construction has been initiated, EPA strongly encourages assistance recipients to make the waiver request prior to the start of construction. Filing a waiver request after construction has begun will require the assistance recipient to file additional paperwork and explain why the request could not have been made before construction started.

When preparing the waiver request, assistance recipients must include sufficient documentation and information to support the waiver application. The specific documentation necessary is listed in Appendix 1 of the EPA guidance and depends on the type of waiver exemption being requested. The information needed includes a description of the project being funded through the ARRA and a description of the specific item or items that are the subject of the Buy American waiver request. Once the application is ready, it should be submitted via email to the assistant recipient’s EPA Region at a special email address provided on page five of the guidance document.

Waiver requests will be reviewed by EPA Regional offices. In reviewing the applications, Regional offices are to use a check list included as Appendix 2 in the guidance document. The Regional offices are to notify assistant recipients that a waiver request has been approved or denied no later than 2 weeks from the date of submission of a completed waiver request. In the event that a waiver request is approved, the approval will be published in the Federal Register and listed on EPA’s Revovery.gov website so that other potential applicants can see the kinds of requests being approved.

There is no formal role for the States in the waiver review process, and NACWA members do not need to submit Buy American waiver requests to their State CWSRF agencies. Although some States may assist their EPA Region in preliminary review of waiver requests, the Regional office will forward copies of wavier applications to State agencies where applicable. NACWA members need only submit their completed waiver requests to their appropriate EPA Region office as outlined in the guidance document.

National Coordination of Waiver Requests & Categorical Waivers
Although EPA Regional offices will take the lead in reviewing and approving waiver requests, EPA will also establish a “Cross-Agency Coordination Working Group” composed of EPA Headquarters staff and representatives from the Regions. This group will provide monitor the overall waiver process and attempt to ensure uniformity in how waiver requests are processed. The group will also provide national oversight and coordination of the waiver process through consultation, quality control, and direction as necessary to clarify and resolve policy issues raised on waiver requests. Additionally, the group will identify potential categorical waivers, either on a national or regional scale, which may apply to particular classes of assistance recipients, particular classes of projects, or particular categories of iron, steel, or manufactured goods. Such national waivers could be issued under the public interest exception to the Buy American requirements if EPA were to make a policy determination that a particular item is not produced domestically in reasonably available quantities or of a sufficient quality. Once such a determination was made for a particular item, that item would be exempted nationally from Buy American requirements and assistance recipients could use that item in ARRA projects without applying for an individual waiver.

Split Funding
EPA has determined that any project funded in whole or in part with ARRA funds must comply with all Buy American provisions. This means that if a recipient receives funds for a project from both the ARRA and from the base CWSRF program (“split” funding), the recipient must apply Buy American requirements to the entire project, not just the portion funded through the ARRA. This approach would also prohibit breaking an ARRA project into smaller subprojects or subcontracts in an attempt to avoid Buy American requirements, particularly where the sub-projects are integrally related to the larger project as a whole. However, EPA does acknowledge in the guidance that there may be situations where major construction activities can be segregated in different phases that are distinct in purpose, time, or place. In these situations, contracts or funding agreements for a distinct phase of the project that are funded through the base CWSRF program would not have to meet Buy American requirements.

Given the complexities involved with split funding and determining whether different construction phases of a projected are integrally related to each other, NACWA members completing a project with both ARRA and base CWSRF funds should carefully consult with their attorneys, contractors, and EPA Region to establish which parts of the project are subject to Buy American requirements.

Next Steps

NACWA will continue to closely track implementation of EPA’s Buy American guidance and application of Buy American provisions to ARRA projects. NACWA will pay particular attention to any national or regional waivers that may be issued and alert the membership as necessary. Additionally, NACWA encourages its members to contact National Office staff, including Pat Sinicropi at This e-mail address is being protected from spambots. You need JavaScript enabled to view it or Nathan Gardner-Andrews at This e-mail address is being protected from spambots. You need JavaScript enabled to view it , with any additional questions or concerns regarding the EPA guidance, including any complications members may experience in applying for Buy American waivers. NACWA also encourages its members to continue to provide their stimulus package implementation stories/experiences via our web portal.